Credit unions have slashed loan non-repayment rates in a pilot project that has raised hopes such unions could be used more widely

Nine unions took part in a two-year trial of the 鈥淧earls鈥� financial monitoring and business planning system, according to a report published this week by the Association of British Credit Unions. The system gives unions information they may not have had before, such as non-repayment rates, and sets targets to be achieved.

Repayment arrears dropped from 42% to 15% in one un-named union, and on average from 8.9% to 6.1%.

Overall, net capital improved from 6.4% to 7.9%, which was particularly important for credit unions that wish to achieve 鈥淰2 status鈥�. This is awarded by the Financial Services Authority and enables unions to lend larger amounts for longer periods.

Several unions changed from requiring individuals to be a regular saver for 13 weeks before getting a loan, to lending according to capacity to repay.

Amanda Winkworth, manager of Portsmouth Savers Credit Union, said: 鈥淭his could be significant for social landlords able to make funds available. Home improvement loans could then be administered on their behalf by credit unions.鈥�

Source

Housing Today